MBI Medico: Medical Practice Brokers Serving MD's, DO's, DPM's & DC's

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MBI Medico: Buying A Medical Practice - Practice Loans

Expert Medical Practice Brokerage Services at MBI Medico

For doctors that are interested in buying a medical practice, it's important to look into several key areas to ensure a successful acquisition.

Here are some practical suggestions:

Know Your Financial Situation

Assess Financing Options: Understand your financing options early on. Consider SBA loans, traditional loans, or seller financing, and get pre-approved if possible.

Understand Profitability: Review the practice’s financial records, including tax returns, profit and loss statements, and accounts receivable. Ensure the practice is consistently profitable or has the potential to grow.

Cash Flow Analysis: Make sure the practice can support your salary and loan repayment while leaving room for growth or unexpected expenses.

Perform Thorough Due Diligence

Understand Patient Demographics: Review the current patient base—age, insurance, location—to see if it aligns with your practice style and goals.

Check Contracts: Review contracts with insurance providers, employees, and any existing vendors. Make sure you can take them over or renegotiate them on favorable terms.

Examine Liabilities: Look at outstanding debts, leases, or legal obligations tied to the practice.

Evaluate the Practice’s Value

Seek a Professional Valuation: Work with a practice broker, CPA, or healthcare consultant to accurately value the practice based on earnings, equipment, goodwill, patient base, and location.

Understand Intangible Assets: Beyond physical assets, consider intangible assets like patient goodwill, reputation, and referral sources, which can heavily influence the practice’s value.

Plan for Transition

Staff Retention: Meet the staff and assess whether you can maintain the current team. Retaining experienced staff can ensure continuity of care and smooth operations.

Owner Transition: Negotiate a transition period where the selling doctor stays on temporarily to introduce you to patients, ensure continuity of care, and provide mentorship.

Marketing and Patient Retention: Develop a strategy to retain existing patients and gradually introduce your management style. Communicate the change to patients in a way that reassures them.

Understand the Legal Implications

Contracts and Compliance: Work with a healthcare attorney to review the purchase agreement, ensure all legal matters are in order, and understand healthcare regulations specific to the practice.

Credentialing and Licensing: Make sure you have the necessary credentials and licenses in place to take over the practice and bill insurance companies.

Evaluate the Practice’s Growth Potential

Opportunities for Expansion: Look for growth opportunities, such as adding new services, expanding hours, or adopting new technology to improve patient care and practice efficiency.

Technology and Equipment: Assess whether the practice is technologically up to date, especially regarding electronic health records (EHR), diagnostic tools, and patient management systems.

Understand the Culture

Fit with Your Vision: Ensure the practice’s culture and patient care philosophy align with your vision and values. You’ll want a smooth integration into the community and patient base.

Negotiate Carefully

Fair Deal Terms: Don’t rush the negotiation. Work with a broker and legal advisors to ensure you’re getting a fair deal that protects your interests, including price, payment structure, and terms for the transition period.

Non-Compete Agreements: Ensure that any non-compete agreements with the selling doctor are fair and legally enforceable in the region.

By following these steps, a doctor can make a well-informed decision and increase the chances of a successful acquisition and smooth transition into practice ownership.

Conventional & Non-Conventional Loans Available

We assist physicians who are looking to purchase a practice by helping them secure the necessary financing.

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MBI Medico: Aovid These Pitfalls When Buying A Medical Pract

Expert Medical Practice Brokerage Services at MBI Medico

Buying a medical practice, whether it's a chiropractic office, podiatry or medical practice (MD/DO), or any other type of healthcare facility, can be a rewarding investment, but it comes with potential pitfalls that can cause significant financial and operational challenges. Here are some of the most common pitfalls to avoid when purchasing a medical practice:

Overpaying for the Practice

Pitfall: Paying more than the practice is worth is one of the most common mistakes. Overvaluing the practice based on inflated projections or emotional attachment can lead to significant financial strain.

Solution: Work with a professional appraiser or valuation expert to assess the fair market value of the practice. Ensure the price is based on realistic revenue, profitability, and growth potential, not just on the seller's expectations or goodwill.

Failing to Properly Review Financial Records

Pitfall: Insufficient due diligence of the practice's financial history, including tax returns, profit-and-loss statements, and accounts receivable, can lead to unpleasant surprises after the purchase.

Solution: Thoroughly review the practice’s financials for at least the last 3–5 years. Pay particular attention to cash flow, accounts receivable, billing practices, and any hidden liabilities. Have an accountant or financial advisor assist with this process.

Not Fully Understanding the Patient Base

Pitfall: Underestimating the importance of the patient base or assuming that existing patients will automatically continue after the sale can lead to a sharp decline in revenue. Additionally, the patient demographic may not align with your skill set or practice focus.

Solution: Investigate patient retention rates, the types of services used most frequently, and any risks related to the current patient base (such as a high percentage of insurance-based patients). Understanding the patient turnover rate and establishing a retention strategy is key to ensuring future growth.

Ignoring Legal and Regulatory Compliance

Pitfall: Overlooking regulatory issues, such as licensing requirements, HIPAA compliance, malpractice insurance, and billing regulations, can result in legal liabilities or even the inability to operate the practice.

Solution: Ensure that the practice is compliant with all relevant state and federal regulations. This includes reviewing malpractice insurance coverage, verifying that all employees are properly credentialed, and making sure the practice adheres to HIPAA and other healthcare privacy laws. Engage an attorney who specializes in healthcare law for a thorough review.

Not Addressing the Lease Terms

Pitfall: Failing to fully review the lease terms, or assuming that the existing lease will carry over seamlessly, can create significant problems down the road, especially if the lease has unfavorable terms (e.g., high rent increases, short-term duration, or restrictive clauses).

Solution: Carefully review the lease agreement, including the remaining term, any rent escalations, renewal options, and potential issues such as maintenance responsibilities or exclusivity clauses. You may need to renegotiate the lease or secure new terms if they are unfavorable.

Neglecting the Transition Plan

Pitfall: A poor transition from the previous owner can lead to a loss of patients, staff, and reputation. If the seller doesn’t adequately introduce you to key relationships (staff, patients, other healthcare providers), you may face challenges in gaining the trust and confidence of the practice's stakeholders.

Solution: Work with the seller on a clear, well-structured transition plan. This should include introductions to key staff, patients, and referring physicians. The seller may need to stay involved for a period of time post-sale to ensure a smooth handover and to help preserve the practice’s goodwill.

Underestimating Operational Challenges

Pitfall: Expecting a smooth transition without considering the day-to-day operational complexities of running the practice (e.g., staff management, billing, marketing, patient flow) can lead to burnout or frustration.

Solution: Get a realistic understanding of what’s required to run the practice efficiently. This includes reviewing systems for scheduling, billing, insurance verification, and patient follow-up. If necessary, hire a practice manager or invest in training to ensure smooth operations.

Overlooking Staff Issues

Pitfall: Failing to consider the staff dynamics or assuming the current team will stay on after the sale can lead to high turnover and disruption. This is especially problematic if key employees (such as senior staff or office managers) are not willing to stay.

Solution: Evaluate the existing staff’s performance, satisfaction, and any existing employment contracts or agreements. Have conversations with key staff to understand their commitment to staying post-sale, and be prepared to address potential turnover issues.

Inadequate Malpractice Insurance and Liability Protection

Pitfall: Failing to ensure proper malpractice coverage or not reviewing any past claims or liability risks associated with the practice can result in serious financial consequences.

Solution: Verify that the practice has adequate malpractice insurance in place, including claims-made or occurrence coverage, depending on the state laws. It’s also crucial to inquire about any pending or past malpractice claims that could impact your risk profile.

Not Having a Clear Exit Strategy

Pitfall: Some buyers fail to plan for an exit strategy or contingency plan if the practice doesn’t perform as expected, which can lead to personal and financial risk down the line.

Solution: Before purchasing the practice, outline your long-term goals and consider how you would exit the business if needed (e.g., selling the practice, merging with another provider, or transitioning to a different field). Having a clear plan in place ensures you're prepared for any unexpected situations.

Failing to Assess the Market and Growth Potential

Pitfall: Not thoroughly assessing the local healthcare market, competition, and growth potential can lead to stagnation and missed opportunities. A practice might be well-established but in a shrinking market or facing stiff competition.

Solution: Research the local market demographics, competition, and the economic outlook. Identify opportunities for growth, such as introducing new services, expanding the patient base, or capitalizing on niche markets. Assess how the practice fits within the broader healthcare landscape.

Underestimating the Cost of Equipment and Facility Upgrades

Pitfall: Many buyers assume the equipment and facility will be in good condition, only to realize after the sale that substantial investments are needed to upgrade outdated equipment or repair facility issues.

Solution: Conduct a thorough inspection of all equipment and the facility. Factor the cost of any necessary upgrades, replacements, or repairs into your financial projections. Negotiate these costs into the sale price if necessary.

Lack of Professional Help

Pitfall: Attempting to buy a practice without professional guidance (e.g., from accountants, attorneys, or practice brokers) can result in missed details, legal issues, or poor financial decisions.

Solution: Hire professionals with experience in medical practice transactions, such as a healthcare attorney, a CPA with experience in practice valuation, and a business broker who specializes in medical practices. They can help navigate the complex process, identify red flags, and ensure you’re making an informed decision.

Not Understanding the Tax Implications

Pitfall: Not understanding the tax structure of the deal or the potential liabilities associated with buying the practice can result in unexpected tax burdens after the purchase.

Solution: Work with a tax advisor to understand the tax implications of the purchase, whether it’s an asset sale or a stock sale. Understand the treatment of goodwill, the impact of depreciation, and other tax issues that may affect your financial planning.

By avoiding these pitfalls and conducting thorough due diligence, you can significantly reduce the risks associated with buying a medical practice and set yourself up for long-term success.

The Hidden Traps In A Practice Sale Are Avoidable!

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